Sunday, February 3, 2019

Delta Neutral Update for QLD/QID and a dollar/euro pair study

As mentioned previously, the recent decline in volatile as reflected in the ATR and OC spreads has limited our delta neutral equity curve.  We can get back in the game by simply lowering the limit stop per our "best odds" value and, really, the only risk we incur is opportunity costs when the market opens above/below our limit stop and the trades never get triggered.  For now we'll hedge our bets a bit and stick with a slightly elevated limit stop value as compared to the "best odds'.

Also, see below, an update to our classic dollar/euro pair trade using the Z-score analytics.
This is not strictly an either/or trading model...we just look for which side of the trade has the greatest probability of reversing and assume (generally correctly) that the the other side of the pair will react inversely. Pretty good odds on this model with a lookback of 6 months we've had 23 trades, 18 of which have been winners. so a 18/5 win/loss with only minimal drawdown.
Click on chart to enlarge.